FINANCIAL MANAGEMENT DOMAIN
2026/2027 EXAM PREP QUESTIONS AND
ANSWERS GRADED A+ 100% PASS
Liabilities
Liabilities consist of what is owed to others or collected in advance (e.g. owner
assessments received prior to the billed month).
Members' equity
Members' equity is called the fund balance under the fund method of reporting. It
equals the difference between the community association's assets and liabilities.
Modified cash basis of accounting
This method records income and expenses on a cash basis with selected items
recorded on an accrual basis. Modified cash varies in format depending on the
number of items accrued.
Net income
Net income is the amount left after deducting expenses from income.
, Net loss
A net loss occurs when expenses are greater than income.
Notes to financial statements
The notes accompany the CPA-prepared financial statements. These footnotes
provide additional information to help the reader understand the community
association's financial situation.
Representation letter
A letter from the CPA that states that the information the community association
provides is true to the best of its knowledge.
Statement of cash flows
This is a summary of the flow of funds into and out of the community association.
Summaries are prepared for normal operations, investment activities, and any
borrowing activities.
Statement of income and expense
2026/2027 EXAM PREP QUESTIONS AND
ANSWERS GRADED A+ 100% PASS
Liabilities
Liabilities consist of what is owed to others or collected in advance (e.g. owner
assessments received prior to the billed month).
Members' equity
Members' equity is called the fund balance under the fund method of reporting. It
equals the difference between the community association's assets and liabilities.
Modified cash basis of accounting
This method records income and expenses on a cash basis with selected items
recorded on an accrual basis. Modified cash varies in format depending on the
number of items accrued.
Net income
Net income is the amount left after deducting expenses from income.
, Net loss
A net loss occurs when expenses are greater than income.
Notes to financial statements
The notes accompany the CPA-prepared financial statements. These footnotes
provide additional information to help the reader understand the community
association's financial situation.
Representation letter
A letter from the CPA that states that the information the community association
provides is true to the best of its knowledge.
Statement of cash flows
This is a summary of the flow of funds into and out of the community association.
Summaries are prepared for normal operations, investment activities, and any
borrowing activities.
Statement of income and expense
